THE NEW INDIA ASSURANCE COMPANY LIMITED & ORS v. M/S LOUIS DREYFUS COMMODITIES INDIA PVT. LTD
2026 INSC 876 · Civil Appeal Nos. 7687-7688 of 2025
Coram: Sanjay Karol; Nongmeikapam Kotiswar Singh
No. Under the Marine Cargo Annual Turnover Policy the turnover was a central aspect in the functioning of the insurance cover, and the agreement was adjustable under the special conditions in accordance with the actual turnover. That adjustability does not displace the clear stipulation under Section 64VB: once the insured amount stood exceeded in terms of turnover, the insured still had to extend the coverage by paying, or guaranteeing to pay, the premium referable to the enhanced turnover before the risk could attach.
Insurance Act, 1938 — s.64VB — Indian Contract Act, 1872 — ss.182, 188, 226, 237 — Marine Cargo Annual Turnover Policy — assumption of risk without premium — authority of an agent — estoppel against a statute —
Insurance Act, 1938 — s.64VB — statutory embargo on assuming risk before premium —
Held: Section 64VB places a statutory embargo on an insurer assuming risk before the premium is received or guaranteed to be paid, and sub-section (2) bars assumption of risk earlier than the date on which the premium has been paid. (¶10)
Insurance Act, 1938 — s.64VB — turnover-based policy — premium for the excess turnover —
Held further: Where the amount for which the insured stood insured is exceeded, it is incumbent upon the insured to extend the coverage by paying the amount based on estimated turnover, or at least guaranteeing to pay it, before the additional risk can attach. (¶11)
Indian Contract Act, 1872 — implied authority of an agent — internal directive of the principal —
Held further: A principal is liable for the actions of its agents only where done in accordance with the rules and regulations of the principal; a clear directive confining premium adjustment to downward revision leaves circumstances that do not permit such authority. (¶12)
Insurance Act, 1938 — s.64VB — estoppel and waiver against a statute — post facto regularisation —
Held further: Acceptance of additional premium after the incident works no estoppel, since estoppel cannot apply in contravention of a statute and Section 64VB provides no possibility for post facto regularisation; the endorsement operates only from the date of payment. Appeals allowed. (¶13, 14)
In the Court's own words
Paragraph 5The case of the appellants before the NCDRC, in opposing the complaint, primarily was that the respondent’s turnover as on 30.06.2010 was INR 1016.35 Crores, which was well beyond INR 600 Crores coverage for the first half of the year. The second instalment was paid on 01.07.2010, but on the 10th of that month itself, the turnover had crossed INR 1200 Crores, i.e., the total amount of the coverage, and on the date of the incident, the said turnover was INR 1724.12 Crores. Since the respondent had not paid any additional premium for the excess amount, on the said date there was no active coverage. This position was contended as per Section 64 VB of the Insurance Act, 1938[^4]. The premium was eventually paid six weeks after the alleged incident, apparently trying to retrospectively regularise the policy. Further, the email dated 14.12.2010 on the basis of which the additional premium was paid was sent by an officer without the requisite approval and, therefore, it did not bind the appellants. The respondent, inter alia, rejected the appellant’s reliance on Section 64 VB of the Insurance Act, since the Special Condition No.4 of the Insurance Agreement states that the premium is subject to the annual Turnover and will be charged as per actual turnover in the Policy Period and also because the payment of additional premium had been accepted without any objection.
Paragraph 5In Harshad J. Shah v. Life Insurance Corporation of India, (1997) 5 SCC 64, this Court explained that actual authority proceeds from the principal’s manifestation to the agent, whereas apparent authority proceeds from the principal’s manifestation to the third party. The Court observed that apparent authority is ‘the authority of an agent as it appears to others’ and is essentially confined to the relationship between the principal and the third party. The agent cannot create such authority by his own assertion and the representation must be traceable to the words, conduct, course of dealing or organisational position conferred by the principal. Para 13 and 14 of the Harshad J. Shah (supra) concerning the above analysis is reproduced hereunder:
Paragraph 11We are of the considered view that Section 64 VB of the Insurance Act would be attracted in the present case. In the policy secured by the respondent i.e., the Marine Cargo Annual Turnover Policy, the turnover of the respondent was a central aspect in the functioning of the insurance cover so provided. The agreement was extended to INR 1200 Crores and was adjustable, under the special conditions, in accordance with the actual turnover. The amount for which the respondent stood insured was exceeded in terms of turnover on 10.07.2010 itself, well before the incident. It was, therefore, incumbent upon the respondent, in view of the clear stipulation under Section 64VB, to either extend the coverage by paying the amount based on estimated turnover or at least guaranteeing to pay the same within a particular time period.
Paragraph 11Section 227 of the Contract Act also permits the authorised part of an agent’s act to be separated from the excess. It provides that where an agent does more than he is authorised to do, and the authorised part can be separated from the unauthorised part, ‘so much only of what he does as is within his authority is binding’. Accordingly, the email may be recognised as a valid clarification insofar as it concerned payment of the scheduled instalments and operation of the policy within the sum lawfully insured. It cannot, however, merely by reason of the same communication, be treated as an independent undertaking of unlimited or retrospectively enlarged cover.
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